www.antea-int.com SETTING UP BUSINESS IN PAKISTAN 1
General Aspects Pakistan is located in South Asia and borders to India in the east, Afghanistan to the west, Iran to the south-west and China towards the north-west; Pakistan is part of the United Nations and Commonwealth nations. It s monetary unit is Rupee. Current population is approximately around 220 million. National language is Urdu. The official language is English. Legal Forms of Business Entities Following are the form of businesses along with legal status Legal form Sole Proprietors Partnerships Companies Feature An individual may set up the business as sole proprietor. There is no regulatory authority for sole proprietorship. Partnership is the relation between two or more persons (maximum twenty) who have agreed to share the profits of a business carried on by all or any of them acting for all. Partnership is governed by the Partnership Act, 1932 and the regulatory authority is Registrar of Firms. The Companies Act, 2017 along with the Companies Rules, 1985 provide the legal framework for operations of companies in Pakistan and the Securities and Exchange Commission of Pakistan is the regulatory authority for the limited liability companies. Sole proprietorship characteristics: Regulatory Authority Current Trend Single Member Company (SMC) There is no regulatory authority, defined by Government of Pakistan, for sole proprietorship. However, the liability of the owner is un-limited. Most of the sole proprietor registered their business under single member company (SMC) to enjoy the benefit of limited liability. Single Member Company can be registered under Companies Act, 2017 and is regulated by the Security & Exchange Commission of Pakistan. Registration of a Partnership firm: Partnership Deed/Registration Application Submitted to Registrar Issue a Certificate of Registration Agreed & signed partnership deed by all the partners along with registration application is being required to register a partnership under Partnership Act, 1932 Signed deed sent to Registrar of Firm of the area in which any place of business of the firm is situated or proposed to be situated. After due verification, the Registrar shall issue a Certificate of Registration. One may opt for an unregistered partnership. 2
Types of companies as per their legal status according to Companies Act, 2017 COMPANY ACT SEC. 2 (17) LIMITED LIABILITY COMPANY UNLIMITED LIABILITY SEC. 2 (71) PUBLIC COMPANY SEC.2 (52) PRIVATE COMPANY SEC. 2 (49) LISTED ON PAKISTAN STOCK EXCHANGE SEC. 2 (38) UNLISTED COMPANY SINGLE MEMBER COMPANY (SMC) SEC. 2 (65) OTHER THAN SMC Registration of a company: Legal form Feature Forming of Company Interested person has option to register company under section 14 the Companies Act, 2017 Availability of Name Company apply for the availability of name as per section 10 of Companies Act, 2017 Documents Required ID, Passport Copy along with Memorandum of Association, prescribed forms, duly filled and signed by sponsors, will be filed to concerned registrar of SECP with in sixty days of reservation of name. Certificate of Incorporation The registrar upon satisfaction will register a company and issue a Certificate of Incorporation under section 16 (5) of Companies Act, 2017. 3
Taxation Tax Advance Income Tax Company requires to pay advance tax on Payments against transactions (adjustable against final tax liability under NTR). On Earning (DIRECT) On Consumption (INDIRECT) Advance Tax Income Tax (Income Tax Ordinance, 2001) Sales Tax Collected at Source Deducted at Source On Goods (Sales Tax Act, 1990) On Services Adjustable Un-Adjustable (Final/Minimum) Federal Excise Duty (FBR) Sales Tax on Services (Provinces) Income Tax: Each person (Individual, Partnership & Company) are required to pay tax on taxable income (Pakistan source income) under Income Tax Ordinance, 2001. Section 153,147,231A,2 31AA,231B,234,235,23 6,236B,236U of Income Tax Ordinance, 2001 Normal Tax Regime Final Tax Regime Minimum Tax Tax on taxable income Section 4 of Income Tax Ordinance, 2001 Final tax applicable under section 148,150,151,152(1), 152(1A),153(1)(a),153(1)(c), 153(2),154,154(2),156,156A, 233(1),234 A of Income Tax Ordinance, 2001 Minimum tax applicable under section 113, 148(8), 153(1)(b), 113(c) of Income Tax Ordinance, 2001 4
Sales Tax: Every person (Individual, Partnership & Company) required to pay sales tax on taxable supplies as per Sales Tax Act, 1990. Other laws & restrictions Following are the few major Act applicable on businesses in Pakistan. Factories Act, 1934 Sales Tax Employees Old Age Benefit Act, 1976 Provident Funds Act, 1925 Provincial Employees Social Security Ordinance, 1965 Minimum Wages Ordinance, 1961 Payment of Wages Act, 1936 Input Tax (Purchases) [Asset] 17% Output Tax (Supplies) [Liability] Workers Welfare Fund Ordinance, 1971 Net off Payable/ Carry forward (Refundable) This material has been prepared by Antea Alliance of Independent Firms. It is intended as general guide only. Accordingly, we recommend that readers seek appropriate professional advice regarding any particular problems that they encounter. This information should not be relied on as a substitute for such an advice. While all reasonable attempts have been made to ensure that the information contained herein is accurate, Antea Alliance of Independent Firms accepts no responsibility for any errors or omission it may contain whether caused by negligence or otherwise, or for any losses, however caused, sustained by any person that relies upon it. 2018 ANTEA 5
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